Consider an 8-month put option on the S&P 500 struck at K = 2100. The current price
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Consider an 8-month put option on the S&P 500 struck at K = 2100. The current price is S = 2050, the risk-free rate is 3%, and the dividend yield on the index is 2%. Use a four-period binomial tree (with CRR values of u and d) to price the option using a volatility of 15%. Value the option supposing it is American. Be sure to indicate when early exercise is optimal, if ever.
Related Book For
An Introduction to Derivative Securities Financial Markets and Risk Management
ISBN: 978-0393913071
1st edition
Authors: Robert A. Jarrow, Arkadev Chatterjee
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